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Base Rate Predictions, April 2011

By January 21, 2017Seed Bank
seed bank

After the resounding success of its predictions last month, specialist contractor mortgage broker Contractor Mortgages Made Easy again held its own version of The Bank of England’s Monetary Policy Committee.

Last month, although the committee itself was split, with three members out of nine voting for a raise, every one of the Contractor Mortgages Made Easy employees that took part in the Monetary Policy Committee correctly predicted that the base rate would be held at 0.5%.

This month we have seen continued speculation that the base rate is about to rise. The Contractor Mortgages Made Easy team have again looked at the economy, and decided whether the base rate would change.

Taj Kang, Associate Director

I will echo the view of most and think the base rate will be held at 0.5% in April. It appears that inflation is still on the rise as widely expected, putting more upward pressure on the base rate. However, there are also some changes pending with the committee that decide the base rate, which may defer any increase in the base rate until the summer. One of the more vociferous advocates of an increase on the committee will be leaving the Bank of England in May. Events in the Middle East and Asia over recent weeks also mean that an increase in the next few months may not have the desired effect of damping inflation, and indeed may do more damage before the Chancellor’s new budget has a chance to bed in. I predicted last month that we will get an increase of 0.25% in May. I would now move this back to summer this year given recent events and the fragile nature of world economy.
I will stick with my personal view from last month that rates will remain at 0.5% until Q2 – Q3 with a gradual rise to 2% over the following 12 months.

Andy McBride, Associate Director

Arguments to keep rates low remain strong with many experts stressing that rates need to be kept down due to our weak economy.

Rebecca Sidwell, Senior Mortgage Consultant

My opinion remains the same this month, in that I anticipate that the base rate will stay the same again. My reason behind this is although there was a modest increase in house prices in March; this is still not enough growth in relation to where the economy is in terms of the fall in GDP, and inflation figures at a record high. I still cannot see anyone wanting to actively encourage the housing market to slow down, and potentially plant a seed of doubt amongst prospective purchasers.
If there is an increase I feel that this would occur towards the later part of the year, around August or November, which are key inflationary months.

Susan Grant, Senior Mortgage and Protection Consultant

I fully expect that the bank of England Base rate will yet again remain the same in April. However, there still remains a huge amount of pressure on the Bank of England to increase interest rates due to an increase in inflation again last month.
I therefore feel that the base rate is going to increase around July time from 0.50% to 0.75%.

Ben Rogers, Senior Mortgage Consultant

My prediction still remains for rates to be held this month. It has now been over 2 years since the base rate was decreased to 0.50% and the Monetary Policy Committee (MPC) are expected to hold again in April, even though inflation figures released in mid March show that inflation rose from 4.0% to 4.4% in February which is more than the 4.2% figure expected and the 2.0% target. Six out of the nine MPC members voted for a hold in March and one of the three members who voted for an increase is stepping down in May to be replaced by someone who is predicted to be less likely to vote for an increase. The government need the economy to grow and at this stage increasing rates, giving consumers less money to spend will not aide this. Recent events in the Middle East and Japan have also affected the world economy which has an effect on our economy too furthering the likelihood that rates will not increase this month.

The Verdict

The new base rate will be announced on Thursday, and our top team of mortgage analysts have predicted that it will remain stable. This could be because not much has changed between this month and the last and they are still waiting to see more growth in the economy before suggesting that the base rate be increased.

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